What is the intrinsic value of the stock of the firm

Assignment Help Accounting Basics

Reference no: EM132816170

Question -

a) What is the intrinsic value of the stock of the firm according to Tomas forecast?

The new little known firm is analyzed from the prospect of investments in its shares by two friends. The firm paid dividends last year 3 EURO per share. Tomas and Arnas examined the prices of similar stocks in the market and found that they provide 12 % expected return. The forecast of Tomas is as follows: 4 % of growth in dividends indefinitely. The forecast of Arnas is as follows: 10% of growth in dividends for the next two years, after which the growth rate is expected to decline to 3 % for the indefinite period.

b) What is the intrinsic value of the stock of the firm according to Arnas forecast?

c) If the stocks of this firm currently are selling in the market for 40 EURO per share, what would be the decisions of Tomas and Arnas, based on their forecasting: is this stock attractive investment? Explain.

Reference no: EM132816170

Questions Cloud

Context of risk and investigative forensics : The readings this week discusses broad context of risk and investigative forensics.

Discussion centers around the concept of blockchain : This discussion centers around the concept of Blockchain.

Define the various technologies that are emerging : Please review the article and define the various technologies that are emerging as noted in the article. Note how these emerging technologies are impacting.

Would dividend harvesting strategy work : Would this dividend "harvesting" strategy work? Why or why not? All dividend-paying companies have to announce the dividend date in advance.

What is the intrinsic value of the stock of the firm : What is the intrinsic value of the stock of the firm according to Tomas forecast? What is the intrinsic value of the stock of firm according to Arnas forecat

Forecast the interest rate on two-year treasuries : Using the expectations theory, forecast the interest rate on two-year Treasuries, 3 years from now.

What are potential issues with security now : You have already sent the memo to Mr. McAlister outlining the need for the disaster plan. As the database administrator, you have decided to install MySQL.

What is the price-earnings ratio : If Hobart City Bank's profit is in row $1,000,000,000.00, what is the price-earnings ratio? Hobart City Bank has the number of shares of ordinary shares

What is the variance of the portfolio : If the correlation coefficient between FIRM ONE and FIRM TWO is .5, what is the variance of the portfolio?

User Account

All Pages